Applied Rationality focuses on public policy issues and tries to take a liberal perspective that is consistent (comments to the posts will often show otherwise) with neoclassical, rational-choice economics.

Tuesday, June 12, 2012

And the taxi driver?

Steven Kopits at foreignpolicy.com has written a thought-provoking article about how autonomous driving technology (the ability of cars to drive themselves without human input) will facilitate a shift from buying cars to buying car services.

For the last several years, Google has been testing self-driving cars, primarily in California and Nevada. Its vehicles use lasers, radars, and other sensors to establish their position and identify objects around them. This data is interpreted by artificial intelligence software that enables the vehicle to drive itself. Google's vehicles have now proved themselves in hundreds of thousands of miles on the road. And Google's not the only game in town. Bosch is also developing the technology, and Cadillac has promised to have a car capable of driving autonomously on the highway by 2015. Self-driving technology is gradually moving to commercialization, and when it does, it will liberate the car from its driver, enabling a vehicle to serve more users.

According to the Transportation Department, the average U.S. vehicle is used less than one hour per day -- a utilization rate of about 5 percent. Many Americans only drive their cars to work, park, and leave them until they drive home at night, making them essentially unavailable for use by others for most of the day. But if the car could drive itself, it could return home to take the children to school, members of the family shopping, and seniors to visit friends or keep appointments. If the vehicle served even one additional passenger, its utilization rate would double, and its capital cost per user would fall by half.

Kopits writes about this in the context of making electric cars affordable. The car-as-service model would allow for the (presently) necessary recharging of batteries. The high utilization rates would also help to cover the high capital costs of the cars.

As interesting is was what Kopits doesn't write about--the effect on labor. Car services would cut into, if not eliminate, traditional taxi and limo services. Essentially, you get the service without the driver. Indeed, it's the lack of a driver--or more specifically, the lack of having to pay a driver--that would make the service cost-effective.

The Bureau of Labor Statistics (BLS) reports that nearly a quarter of a million people in the U.S. were employed as taxi drivers or chauffeurs in 2010 and that the number of jobs is expected to increase by 20 percent over the next decade (faster than other occupations). The work does not require any special experience or education; the BLS lists the entry-level education as less than high school. Also, the job requires minimal training. The pay, at approximately $22,440 per year or $10.79 per hour, is sub-par, but there is pay.

There would certainly be a lot of benefits with self-driving cars, but to borrow from Cheryl Crow, taxi jobs might "real gone" sooner than you think.

BTW, don't even get me started about Pixar taking all those great acting jobs away.